The American Institute of CPAs (AICPA) has submitted a letter to leadership of the Congressional tax writing committees asking them to amend the Section 199A Qualified Business Income (QBI) deduction in preparation for a tax reconciliation bill. By amending the Section 199A deduction, owners of specified service trades or businesses (SSTBs) that are eligible for the QBI deduction would not experience steep reductions in their QBI deduction created by the narrow QBI deduction limitation phase-in range.
Section 199A generally allows owners of pass-through entities to deduct 20 percent of the owner’s QBI earned in a qualified trade or business. Owners of SSTBs can claim the QBI deduction if the taxable income, before consideration of the QBI deduction itself, of the owner is less than certain threshold amounts. Once a taxpayer’s taxable income exceeds the threshold amounts, certain limitations on the deduction begin to phase-in.
The AICPA recommends that Congress broaden the QBI deduction by increasing the $50,000 (non-joint returns) and $100,000 (joint returns) amounts under section 199A(b)(3)(B) and section 199A(d)(3)(A). This will prevent taxpayers within the phase-in range from experiencing significant reductions of the QBI deduction for exceeding the SSTB threshold amounts. The AICPA also recommends that these QBI limitation phase-in range amounts be adjusted for inflation annually.
“By increasing and indexing the phase-in range, the distinction between SSTB QBI and non-SSTB QBI is decreased but not removed, while the marginal tax rate effect of the phase-in limitation is reduced” said Daniel Hauffe, AICPA Senior Manager, Tax Policy & Advocacy. “We believe these changes will help enhance horizontal equity among small business owners and reduce such owners’ need for complex tax planning regarding the QBI deduction.
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Tags: pass-through, Taxes
Ronald Felix Hierbaum February 18 2025 at 11:57 am
I am embarrassed as a CPA and member of the "leftie" group called the AICPA for this recommendation. Why change what is good for small businesses? They do not have tax gimmick options like transfer pricing, international tax strategies, huge section 179 deductions over 1 million or other gimmicks that reduce the effective tax rate. For example where were you guys/girls when it comes to accelerated depreciation, that phony bonus depreciation and section 179 which allowed huge deferred taxes which to me is a tax free loan. It is no surprise that many corporations have years where they pay zero taxes. Examples are GE, Boeing with government credits, Verizon, and on and on. But the little guy can use the help. P.S Where were you when Apple set up 3rd world companies to hide taxable rebate revenue (Google "Double Irish"). Where were you guys when Western Digital was playing tax games with their "transfer pricing" gimmicks. It is easy to lose respect for the AICPA protecting large corporations at the expense of small companies. I do not have a dog in the fight but it is now clear that congress and the AICPA protect large corporations for different reasons. I thought your group was better than that.